Wednesday, June 10, 2015

Large banks are now, finally feeling the impact of their dishonesty!

The global financial crisis, which has caused such vast
financial damage to the interests of thousands of investors and working people,
and which has cost the tax payer billions of pounds to prop-up bankrupt
financial institutions, was caused, primarily, by the greed and the dishonesty
of the major banking system.

For years, the banks had engaged in a series of dishonest
and flaky practices which had generated significant profits for them and their
investors, and which had been carried out at the expense of the funds of their
depositors and customers.

There was a time, not so long ago, when the ambition of
every finance CEO was ‘to get as big a share of the customer’s wallet as
possible’. Tactics designed to ‘cross-sell, up-sell’ to clients were promoted, and
staff were encouraged to aggressively promote new products and services to
clients, designed to capture a bigger share of their capital.

It seemed you could not go into a bank or building
society without having some new financial product, credit card or loan facility
stuffed down your throat. And of course, with every new financial product, came
a commensurate encouragement to take out a PPI contract. Of course, you were
not to know that the likelihood of the PPI insurance product to operate in your
favour should you have need of recourse to its facilities was largely illusory,
you were just cheated into believing that you were somehow covered by an
insurance umbrella. That justified your taking out the loan, which in many people’s
cases, they could not really afford.

There was a kind of collective hysteria gripping the
market as ordinary working people were encouraged by slick-talking salesmen to
extend their debts, to re-mortgage their houses in order to pay for foreign
travel or holidays, secured on credit card debts.

It suddenly seemed as if the whole world was on a huge debt
binge, borrowing money without any thought of how it would be re-paid, and this
money didn’t even exist! It was being printed by the banks that were operating,
as always, with one eye on their bonus targets. These targets were becoming
more inflated and staff were being forced to work ever harder to make their
numbers, but it didn’t matter, because the banks were busily ‘securitising’ the
debts being created, and sold off to other investors who re-packaged these
debts in their turn and who sold them on to further groups, generating even
more commission for themselves and their institutions.

The whole thing became a merry-go-round of greed and
fraud, but no-one seemed to care, as long as the spin-off of constant revenues
was maintained.

These frauds were being practiced at the same time as the
more traditional models of criminality which underpinned the banks’ balance
sheets were being continued. International money laundering on an
institutionalised scale was being promoted, and the regulatory controls which
were supposed to prevent global money laundering were identified by their
absence. It was almost as if the major banks had decided to individually ignore
the rules and regulations on money laundering, because they had discovered that
the facilitation of money movements for organised crime paid significant
profits and dividends.

HSBC
were able to demonstrate this very effectively because in 2012 HSBC Holdings Plc agreed to pay a record $1.92
billion in fines to U.S. authorities for allowing itself to be used to launder
a river of drug money flowing out of Mexico and other banking lapses.

Mexico's Sinaloa cartel and Colombia's Norte del Valle
cartel between them laundered $881 million through HSBC and a Mexican unit, the
U.S. Justice Department said.

Stuart
Gulliver described this level of drug money laundering as a ‘mistake’!

Hmmmmm!

Of
course, at the same time as engaging in money laundering on an eye-watering
scale, HSBC was offering its high-net worth clients an opportunity to engage in
institutionalised levels of tax evasion, through the facilities offered by
their Swiss branch in Zurich.

Of
course, we have no means of knowing how much money HSBC was taking in terms of
profits and revenues for providing this service. But one must imagine it was not
insignificant.

Stuart
Gulliver later apologised for the damage this episode had caused to the bank’s
reputation.

Hmmmmm.

More
recently there have been the huge fines which HSBC has had to pay for their
part in the Libor and Forex manipulation escapades.

In
the Forex scam, one HSBC trader complained in an email to another team member
who had not given him the information he needed: “You are useless... how can I
make free money with no fucking heads up.”

Now,
it appears that HSBC has got a lot of difficult questions to answer following
the revelations in the FIFA bribery scandal.

Some
of those questions involve transactions including;

*A $1.2m wire transfer from a Traffic bank
account in Miami to a correspondent HSBC account in Buffalo, New York, which
was then sent to a HSBC Hong Kong account of a front company for another
co-conspirator on November 13, 2012

*Two
wire transfers of $750,000 and $250,000 from the HSBC Hong Kong account to a
New York account of Standard Chartered, for credit to a Cayman Islands account
held by Kosson Ventures, a company controlled by Costas Takkas, the attaché to
Fifa vice president Jeffrey Webb on November 21, 2012

*A $500,000 payment from another sports
marketing company on December 5 2013 for credit to the HSBC account of a luxury
yacht maker in London. Barclays and HSBC have not commented on the matter.

Why
am I not surprised.

The
purpose behind my reiterating these disgraceful events is to amplify the level
of wrong-doing and criminal law-breaking which HSBC has indulged in the past
years, activities which have generated huge profits for them, profits which
have lined the pockets of their investors.

HSBC
has behaved exactly like a main-stream Mafiosi crime group, engaging in
criminal behaviour as a matter of course, and taking inflated profits from the
outcome of these activities.

Had it
been any other organisation which had engaged in these criminal enterprises,
the Government would have had little choice than to throw the book at them,
ordering wholesale criminal investigations and demanding serious penalties and
sentences.

For
some reason, because these actions are committed by banks, no-one is at all fazed
by these actions. The regulators have done little or nothing to bring this
recalcitrant bank to heel, and all Stuart Gulliver has done is to wring his
hands and apologise ineffectively.

So
now, Mr Gulliver has announced his plans to readjust his banking empire.

HSBC has
been under severe pressure since the 2008 financial crisis to cut costs, meet
stringent new regulatory demands and satisfy restless shareholders.

To that
end, the British bank said on Tuesday that it would shed as many as 50,000 of
its approximately 250,000 jobs as it sells several underperforming businesses,
reduces the size of its global investment banking business and tries to cut
billions of dollars in costs.

The
latest moves are part of HSBC’s major strategic revamping . As part of the
newest changes, HSBC said it would increase its investment in Asia, where it
generates more than half of its earnings. The bank has been evaluating whether
to move its headquarters to Hong Kong from London, and it said it would
complete that review by the end of the year.

The bank,
which traces its roots to Hong Kong and used to be called the Hongkong and
Shanghai Banking Corporation when it was founded, still has close ties to the
Asia-Pacific region. Asia accounted for 78 percent of the bank’s pre-tax profit
in 2014.

Mr.
Gulliver is under increasing pressure to satisfy investors after recent scandals
damaged the lender’s reputation. HSBC also faces an increasingly challenging
regulatory environment in Britain and across the globe. The bank’s shares have
fallen about 2.4 percent in the last year.

“We
recognize that we need to do a lot more to address the changing environment,”
Mr. Gulliver said.

Among the
moves announced on Tuesday, the bank said it would eliminate 22,000 to 25,000
full-time jobs, or about 10 percent of its work force, by the end of 2017.
About 8,000 of the job cuts are expected in Britain, where HSBC employs about
46,000 people.

The
bank faces a major conflict of interests.

Its
investors and shareholders are complaining vociferously that the bank is not
paying the level of dividends they are used to. Well, this is hardly surprising,
the bank has been forced to step back from its organised criminal enterprises,
and has had to start to make money out of straight-forward vanilla banking
activities.

They
have discovered the truth of one of my major assertions which is that the
global banks cannot return the same level of investment revenue without committing
criminal offences.

They simply cannot make the profits they have hitherto made,
without breaking the law, and the increased regulatory environment, which is
long overdue, is making it so much harder for the dirty banks to make dirty
profits.

They
are responding by a major policy of staff-shedding, and by almost certainly
shedding their UK retail arm.

They
are reverting to an earlier incarnation whereby they will focus their business
attention on China and the Far East. Well, this at least should help them build
up their profits again, because this area of the world is notorious for the
movement of the proceeds of corruption and other forms of dirty money. If they
move their HQ from London and re-engage in Hong Kong, they should be able to
get back to their dodgy business activities without too much of a time-break.
They started life as a drug bank to British opium dealers in the nineteenth
century, and their recent activities in Mexico demonstrate that they had clearly
forgotten nothing in the interim.

I
don’t personally think it will do them much good. The American have now got
HSBC clearly in their sights, their latest escapades in the FIFA money
laundering will not have gone down well with the US authorities.

Even
if they relocate to Hong Kong, the US law enforcers can reach out to them there
if they continue to transact business in US dollars. However, there is too much
dirty money floating around in China and the Far East for HSBC to resist, and I
predict that if they do go back (I still think it is unlikely), they will be up
to their elbows in black money before you can say ‘Fei Chien’ (flying money)!

These
latest proposals by HSBC management are yet another attempt to bring pressure
on the UK Government, to back pedal on the implications of the new regulatory
environment, the ring-fencing of retail banks, and the new regime of anti-money
laundering.

The
Government must not weaken in their resolve to force these criminal enterprises
to get back to the straight and narrow. By making a significant number of UK
employees redundant and by chopping British jobs, as a programme of
re-positioning, HSBC are throwing down a gauntlet to George Osborne. ‘Look how
much damage we can cause to British jobs if you force us to smarten up our act’.

This
is yet another example of the culture of bullying these banks operate within
and shows, if such a lesson needed learning, that they have no concern for UK
workers and who are expendable when the bank’s creditors start pushing for more
and bigger dividend payments.

The
cynicism behind this action is breathtaking, and George Osborn needs to
remember this when ‘friends’ of Stuart Gulliver start jockeying and lobbying
for him to be given a knighthood!

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!